Mexican officials optimistic about NAFTA news in coming days

GENEVA/MEXICO CITY (Reuters) - Mexican negotiators are optimistic about the possibility of getting a NAFTA deal and are hopeful of progress in coming days, the country’s deputy economy minister said ahead of a second ministerial meeting in Washington later this week.

“You are going to see hopefully news coming out of Washington in the next few days. There is optimism,” Juan Carlos Baker, deputy economy minister and member of the NAFTA negotiating team, said on Tuesday.

“I would say that we realized there might be conditions for getting a NAFTA deal,” he said in Geneva, where he met other trade allies to discuss possible responses to U.S. President Donald Trump’s threats to unilaterally impose tariffs on car imports.

Stop-start talks to renegotiate NAFTA have dragged on for more than a year, with similar moments of optimism in the past. The talks recently suffered a setback when Trump imposed steel and aluminum tariffs, triggering retaliation from Mexico and Canada, and followed by his threat to target cars next.

Mexican Economy Minister Ildefonso Guajardo said sticking points in the NAFTA negotiations that restarted between Mexico and the United States last week include dispute resolution, auto sector rules and a U.S. proposal to scrap the $1 trillion trade deal if it is not renegotiated every five years.

Guajardo, who has said in recent days he thought the outline of a deal could be agreed in August, is due in Washington to talk with U.S. Trade Representative Robert Lighthizer on Thursday.

Jesus Seade, the chief NAFTA negotiator for Mexico’s President-elect Andres Manuel Lopez Obrador, told French television on Tuesday he thought a final agreement could be ratified by the new U.S. Congress after the November U.S. mid-term elections.

Mexico, the United States and Canada have been trying to forge a revamped version of the 1994 trade pact since last year at the behest of Trump, who says he wants a better deal for U.S. business and workers.

Canada’s Foreign Minister Chrystia Freeland is not taking part in the current round of talks, as Mexico and the United States try to thrash out an agreement on including more North American content in autos made in the region, and possibly increasing wages.

There are signs Mexico has shown some flexibility since it offered in May to raise the content requirement to 70 percent from a current 62.5 percent. The United States is asking for the threshold to be 75 percent.

“We are going to give serious consideration to all the ideas presented, we are going to be flexible if that is possible,” Baker said, adding that talks were focused on several issues at once, not only autos.

Two industry sources in Mexico said an informal offer had been made to raise the content threshold a little higher, although a government official with knowledge of the talks denied that was Mexico’s proposal.

Bloomberg on Tuesday reported the U.S. and Mexico were in final stages of negotiating a deal on auto rules, saying the two sides had exchanged new proposals.

Lighthizer’s office denied the absence of Freeland from the latest round of talks was an attempt to negotiate a bilateral NAFTA with Mexico.

“In addition to the trilateral meetings, throughout the renegotiation of NAFTA there have been numerous bilateral meetings,” said USTR spokeswoman Emily Davis.

A Canadian government official, who asked to remain anonymous given the sensitivity of the situation, said there had been no chance of Freeland traveling to Washington since she was scheduled to attend a meeting in Singapore this week.

AUTO TARIFFS

Mexico’s Baker had met with senior trade officials from Canada, Japan, South Korea and the European Union in Geneva, which is also home to the World Trade Organization.

The countries — long term U.S. allies at odds with Trump over trade relations — were all determined to respond if tariffs on cars were imposed under a national security investigation, he said, noting the U.S. process to introduce such tariffs had not halted despite U.S.-European talks last week that were supposed to have seen off the immediate threat.

Last week European Commission President Jean-Claude Juncker said he had secured a “major concession” from President Donald Trump, having agreed that as long as the two sides were negotiating on trade, they would hold off on imposing further measures, including U.S. tariffs on cars and auto parts.

“Until that process is fully concluded and no tariffs are imposed, we need to be serious and consider the possibility that those tariffs may be established. We need to make clear that we are prepared to react,” Baker said.

Reporting by Tom Miles in Geneva and Frank Jack Daniel in Mexico City; Additional reporting David Ljunggren in Ottawa, David Lawder in Washington, Christine Murray and Stefanie Eschenbacher in Mexico City; Writing by Tom Miles and Frank Jack Daniel; Editing by Simon Cameron-Moore